Student loan forgiveness: What to know about the Trump administration's agreement to resume loan cancellations
Students on the Stony Brook University campus in 2023. Credit: Morgan Campbell
Many student loan borrowers can expect to get relief under the Trump administration’s recent agreement to resume forgiveness for certain student loans — good news for those working in lower-paying public service jobs and those facing financial hardship, Long Island financial aid officers said Tuesday.
The deal “is going to make a huge difference” for people overloaded with debt, said Sandra Mervius, director of financial aid at Hofstra University in Hempstead.
The programs that are set to resume forgiveness “were helping people still stay on their feet while making a good effort to pay back their debt, and to me, those are the people who need forgiveness most of all,” Mervius said.
The federal Department of Education struck the agreement on Friday with the American Federation of Teachers, the union that sued the agency in March after it stopped processing income-driven repayment plan forgiveness applications.
Under the deal, the Department of Education will again process student loan forgiveness applications for borrowers in two loan programs that link payments to income: the original Income-Contingent Repayment plan and the Pay as You Earn plan. The agency will continue to forgive those loans for eligible borrowers until July 2028, when both programs will be phased out as a result of President Donald Trump’s One Big Beautiful Bill Act, passed this summer.
Borrowers still in those programs by 2028 will need to move into a new program with stricter repayment terms.
The deal still requires court approval, and it is not yet clear when it would take effect, said Megan Walter, a policy analyst with the National Association of Student Financial Aid Administrators. However, she said, it is expected to get a green light.
Many borrowers have been “stuck in this limbo of not having anything processed and really with no resolution,” Walter said.
The deal allows borrowers to avoid paying federal taxes on the forgiven debt if they become eligible by Dec. 31, even if their forgiveness gets processed after that date, Walter said.
Borrowers in certain programs who become eligible for forgiveness after that date will pay federal taxes on the forgiven debt, she said. However, the public service loan forgiveness program is not subject to federal taxes, she said.
Some forgiveness programs require borrowers to make payments for 20 to 25 years, and borrowers have been operating on assurances by previous administrations that their loan balances would eventually be forgiven, said Carolina Rodriguez, director of the Education Debt Consumer Assistance Program at the Community Service Society of New York.
Forgiving the debt is “the right thing to do,” she said. If borrowers have not yet paid back their loans after 20 years, it’s probably because they cannot afford to do so, she said. “It's costing the government more money to manage those loans than what they will ever be able to recoup.”
For those overloaded with student loans, “having an opportunity to get that burden off of their shoulders or out of their accounts would be very beneficial,” said Nicholas Prewett, executive director of financial aid and scholarship services at Stony Brook University.
The agreement “is a tremendous win for borrowers,” Winston Berkman-Breen, legal director for Protect Borrowers, which represents the AFT in the lawsuit, said in a statement. The Department of Education, he said, will “deliver congressionally mandated affordable payments and debt relief to hard-working public service workers across the country, and will do so under court supervision.”
The deal does not affect the Saving on a Valuable Education, or SAVE, plan, a Biden administration income-driven program that was paused by a court order.
The recent agreement “is not arbitrary loan forgiveness as was attempted under the Biden Administration,” a Department of Education spokesperson said in an emailed statement Tuesday. Calling certain Biden programs “illegal,” the spokesperson wrote that after those programs were removed, the administration is now “able to process legitimate loan cancellations once again for borrowers who have been making payments for the requisite number of years.”
Maura McDermott covers education. Since joining Newsday in 2012, she also has worked on the investigations team and covered real estate and the business of health care.
